Ever wondered why you can’t stick to a budget, even when it makes sense logically?
Behavioral economics can teach us a lot about why we tend to neglect our budgets and overspend, but one theory that sticks out is the present bias: valuing the present gratification instead of the long-term. Think of the marshmallow test made famous in the 1970s: Would you rather have one marshmallow now, or two in an hour? The same can go for spending; for some people, this might mean overpaying for certain items in the moment, spending more money than intended during a big sale, or spending money that we had hoped to save for retirement.
There’s no one right way to get your spending under control, but recognizing why you spend the way you do may help you finally stick to that budget. Here’s how understanding the psychology behind spending and saving could actually benefit you next time you hit the store.
1. Never go shopping without a list.
Composing a list ahead of time can help avoid impulse purchases and future buyer’s remorse because the process of creating the list forces you to spend time before your shopping trip thinking about what you need.
While many people associate shopping lists with groceries, this can also help keep your spending in check on other big shopping trips, like when buying holiday gifts or back-to-school supplies. Old-fashioned pen-and-paper lists work, but you can also simply use the notes function on your phone or a dedicated shopping lists app.
Once you’re in the store, a list can keep you focused, so you’ll be less tempted by items on display. Another bonus of shopping with a list: You’re less likely to forget to pick up something you need. Getting everything in one shot means you can save yourself another trip and avoid the spending temptation that might come along with it.
2. Always double check that you’re getting the best value.
That “shopping high” that you’ve heard of is actually a scientific phenomenon. Seeing new things, and the anticipation of purchasing them, can cause the brain to release dopamine, a chemical that makes you feel good.
Scientists have found that the anticipation of purchasing something you want lights up the nucleus accumbens, or pleasure center, in your brain, but if you believe that the item costs too much, the rational, decision-making parts of your brain will overrule the purchase. Problem is, the rational part only kicks in if you think that the price is too high, which may not happen if you believe you’re getting a great deal (even if you’re not).
Fortunately, with today’s technology, it’s easy to confirm that you are indeed getting a good price. Before putting an item into your (real or virtual) cart, do a quick online search to see whether the item is available elsewhere for a lower price or if there’s an easy online coupon that you can apply.
Keep value in mind when bulk shopping as well. People often overspend in warehouse stores because they assume that they’re getting a rock-bottom price, says Ross Steinman, a psychology professor at Widener University in Pennsylvania who researches consumer behavior. Before throwing those cases into your cart, take a few minutes to do the math, advises Steinman, and pause to ask yourself whether it’s a purchase you really need to buy at scale.
“People often buy a lot of things in bulk that they end up wasting,” he says. “It feels like you’re saving money, but you’re actually losing money in the long term.”
3. Don’t shop when you’re feeling emotional.
More than 7 in 10 people consider their finances a source of stress, according to a Capital One survey of more than 2,000 respondents in the U.S. If you’re among them, be especially cautious when you’re spending, since your emotions may further cloud your judgment.
“When you’re in a heightened arousal state, emotionally or physiologically, your faculties are not at an optimal level,” Steinman says. “That could lead you to buy something that you might not have intended to purchase. Just being aware of that — and of your spending triggers — can help you avoid it.”
4. Sleep on it before purchasing large items.
For items over a set amount — say, $100 — institute a one- or two-day waiting period before pulling the trigger. With online shopping, you can put the items in your virtual shopping cart but avoid checking out immediately.
“Just put it in your shopping cart and walk away,” says Carrie Rattle, founder and CEO of Behavioral Cents and a compulsive shopping coach. “That really works.”
You may find that by the time the waiting period has passed the item isn’t as appealing as it was in the moment. Plus, as you probably know, lack of sleep also affects both mood and judgment — so getting a good night’s rest can not only improve your decision-making, but also thwart that emotional impulse-spending (remember tip three!). If you still want that $100-plus item, you may be able to complete the purchase with confidence that you haven’t simply gotten caught up in the rush of shopping.
5. Say ‘no’ to sales, unless the item is already on your list.
Sure, it’s exciting in the moment when you snag an item at a discount, but if you end up purchasing an item you didn’t really want, you may not feel so great later. Remember that the point of store promotions is to get customers to spend more money. Before clicking on an email that’s announcing a big online savings event or entering a store advertising a big sale, ask yourself whether you needed anything from that store before you got notice of the discount.
Steinman recommends setting up an extra email address specifically for promotional emails. That way, you won’t be tempted to click every time one arrives, but you’ll have access to the discounts should you need to shop for a specific item or at a certain store.
Of course, it’s OK to buy things you want as well as things you need — as long as you make the purchases mindfully. Consider creating a second list of things that you want, but don’t actually need. This serves as another way to “sleep on purchases” (tip four!) before pulling the trigger. Then when that item goes on sale, you’ll be able to buy it guilt-free, knowing that it’s something you really wanted — and you’re getting it at a great price.
It may take time to change long-term spending habits, but thinking about how you’re making purchase decisions is the first step in the right direction. The tricks outlined above can help you take control of your spending, making shopping a more enjoyable experience, both in the moment and afterward.
This article is not intended to give medical, legal, or financial advice, and any questions the reader has should be directed to their own qualified professional.
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